Forget the job market: Workers buy or start a business

Lose your job? Some South Florida residents opt to buy or start a business

October 8, 2010|Marcia Heroux Pounds, Sun Sentinel

John Rezai was an investment banker on Wall Street, participating in some of the nation's largest public offerings including Google. After losing his job in 2008, he and his wife Jennifer, a CPA, decided to buy an existing business in Fort Lauderdale.

Craig Glover's employer moved to Kentucky, but his family wanted to remain in South Florida. So Glover and his novelist wife Bonnie bought a franchise in Broward County.

Sharon Gadbois was let go in 2009 from her job at a sports nutrition firm in Palm Beach County. A graduate of the Fort Lauderdale Art Institute, she took her web design and social media skills and created her own job.

With nearly 12 percent unemployment, over 1 million Floridians are hunting for a job. But a growing number of workers are trying a different approach: self-employment. More people launched businesses in 2009 than any time in the past 14 years, according to Kauffman Foundation, an entrepreneurship research organization.

Workers who decide to employ themselves generally have three options: buy an existing business, invest in a franchise, or start a business. The best choice depends on several factors.

"What do they want the business to do for them?" is the primary question people should ask themselves, said Brian Miller, president of The Entrepreneur's Source, an organization that matches people with franchises. Some potential franchisees are looking for regular income from the business while others are more concerned about building retirement income or leaving a legacy for their children.

For the unemployed who decide to go into business, startup money is often the biggest stumbling block. People once tapped their home equity, but that's hard to come by in South Florida's overly leveraged housing market. Instead, some workers are drawing on their 401(k) retirement funds to buy a franchise or business. Others are starting a low-cost venture, often a technology-based home business.

The costs can be as little as a few hundred dollars to start a computer-based business to several hundred thousand for a brand-name franchise. Here are some things to think about for each self-employment option:

Option 1: Buy an existing business

For anyone who wants to buy a business, there are deals to be had in this economy. The advantage of an existing business is "the cash register is ringing from day one," said Andy Cagnetta, founder of Transworld Business Brokers in Fort Lauderdale. "People's habits die very hard. If a dry cleaner is around corner, people are used to going to that dry cleaner or doctor's practice or gym."

Former investment banker John Rezai and his wife Jennifer worked with Transworld to buy an existing business after John was laid off in late 2008. "I went through the process of 'what do I want? What are we going to do next?'…. My wife and I knew it would involve a bit of a reinvention. Once we accepted that fact, the world was our oyster," Rezai said.

They decided to buy a business in Florida, where they had often spent vacations. "We wanted to be together as a family. And we wanted that independence that comes with owning a business," Rezai said.

The couple enlisted Transworld to help them find the right business. Fort Lauderdale Ice, which provides ice to restaurants, was being sold by its founder who had been in the business for 35 years and it had regular customers in the restaurant business. "We wanted to buy that stream of cash flow," Rezai said.

In buying an existing business, it's important to "understand what you're buying," Rezai said. With expertise in valuations, he was able to look at the business and related perks, such as health insurance, and analyze its real value and cash flow. "We did our homework and we haven't been surprised by too many things," Rezai said.

The Resais didn't have to seek startup funding, which is difficult for many in the current economic environment, because they were able to pay cash for the business. There also was no fee from Transworld because the seller pays the broker's fee, not the buyer.

The couple, who have been operating Fort Lauderdale Ice since April, says Transworld broker Thomas Jones was critical to closing the sale with the former owner. "It's his baby. He doesn't want it to go into the wrong hands after spending 35 years on it," Renzai said. "The broker plays the role of intermediary."

Option 2: Buy a franchise

People who buy a franchise gain the advantages of a support system that can include a roadmap and training from the franchisor and advice from other franchisees.

Craig and Bonnie Glover of Pembroke Pines decided to buy a home-based franchise, HOODZ kitchen exhaust cleaning business, after Craig's employer moved out of state. With two teenagers in high school, the Glovers decided it was not a good time to move. "We wanted to have more time as a family, to leave a legacy for our kids, and to be more actively involved in the community," Craig Glover said.